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Neutral citation: 2001 FCA 197
CORAM: RICHARD C.J.
LLOYD D. HILLIER
- and -
ATTORNEY GENERAL OF CANADA
Heard at St. John's, Newfoundland on Thursday, May 31, 2001
Judgment delivered at Ottawa, Ontario, on Monday, June 11, 2001
REASONS FOR JUDGMENT BY: SEXTON J.A.
CONCURRED IN BY: RICHARD C.J.
Neutral citation: 2001 FCA 197
CORAM: RICHARD C.J.
LLOYD D. HILLIER
- and -
ATTORNEY GENERAL OF CANADA
REASONS FOR JUDGMENT
 This is an appeal from an order of the Trial Division dismissing the appellant's application for judicial review of a decision of an officer of Revenue Canada to not cancel or waive interest and penalties assessed against him. The appellant had alleged undue delay upon the part of the Minister of National Revenue in finally reassessing him.
 In the fall of 1993 Revenue Canada commenced an audit of the appellant's income tax returns for the years 1989 to 1992. The audit turned up evidence of previously unreported income. As a result, reassessments for those taxation years were issued on April 28, 1995. The appellant was also assessed penalties and interest in respect of each of the audited years. On June 29, 1995, the appellant filed notices of objection with respect to the reassessments. The matter was assigned to the Appeals Division of Revenue Canada in St. John's, Newfoundland. On October 31, 1995, the appellant forwarded certain requested information to Revenue Canada. As a result of staff changes and reassignments, however, it was January 23, 1998, almost 31 months after the notices were filed, before a thorough review of the objections was commenced. The review was completed on July 31, 1998.
 On August 27, 1998, notices of reassessment for the 1990, 1991, 1992 taxation years were issued. The amount of total income that had been assessed as a result of the 1993-1995 audit was reduced, although not to the point of eliminating the appellant's additional tax liability. The 1995 reassessment with respect to the 1989 taxation year was confirmed.
 On November 23, 1998, the appellant requested, pursuant to subs. 220(3.1) of the Income Tax Act, that the Minister waive or cancel the penalties and interest assessed against him for the 1989 through 1992 taxation years. The appellant alleged that Revenue Canada had extended the process of dealing with his notices of objection "for an unreasonable and excessive period of time."
 By letter dated June 4, 1999, the Chief of Appeals, Newfoundland and Labrador Tax Services Office, denied the appellant's request. The letter stated, in part:
A detailed review of the audit process indicates that there were no undue delays during the audit as there were ongoing discussions between your representatives and the Audit Division officials throughout this period.
At the time you received your Notices of Reassessment, you became aware of the balance outstanding. You chose not to pay the amount owing and exercised your right under the Income Tax Act and filed a Notice of Objection. While this action was in progress arrears interest continued to accrue on the outstanding balance. Although the Department did not enforce payment of this balance, because of the Notice of Objection you filed, the option remained to pay the tax balance outstanding, pending the outcome of the Notice of Objection, to avoid further accumulation of interest.
It should be noted that the amount of the penalties assessed each year was not affected by the period of time it took to process the Notice of Objection. Accordingly, cancelling or waiving of the penalties would not be appropriate in the circumstances.
 As a result of Ministerial inquiry, a second review of the request was undertaken by the Director, Newfoundland and Labrador Tax Services office. He too denied the request, informing the appellant by letter dated July 16, 1999:
We have reviewed the facts of this case and considered the issues raised by your Representative's letter of November 23, 1998. As there is no indication that such circumstances existed in your case, I must confirm that the interest and penalties charged to you were properly assessed. Our review indicated that there were no undue delays which occurred during the audit process. With respect to the period of time this case was outstanding at the Objection stage, the Department's position is that once a Notice of Reassessment has been issued, an individual becomes aware of any balances outstanding and has the option, after a Notice of [O]bjection has been filed, to pay the outstanding balances and avoid any further accumulation of interest. At this point, payments of these balances is within the control of the individual.
 On judicial review of the Director's decision, the Motions Judge held that the time taken to complete the audit and initial reassessment (from the fall of 1993 to the spring of 1995) was not unreasonable.
 The Motions Judge went on to review the Director's denial of the appellant's request for waiver or cancellation of penalties and interest, a request made on the basis of undue delay in dealing with the notices of objection. He pointed out that the appellant had been aware in May, 1995 of the amount of taxes and interest that were payable, subject to any adjustment resulting from the notices of objection and could, in his view, have paid the taxes and interest at that time. The Motions Judge reviewed the process and factors considered by the Director in making his decision. He concluded that the decision was a reasonable one, that there was no indication of bad faith on the part of the Minister or his delegate, the Director, that there was no breach of natural justice and that there was no reliance placed on considerations extraneous to the statutory provisions.
 The parties agreed before us that because the penalties assessed against the appellant were related to unreported income amounts that were not altered by the 1998 reassessment, there was no need for the Court to consider whether they should be waived or cancelled. As a result, the remainder of these reasons will focus only the decision to not waive or cancel interest amounts owed by the appellant. I propose to consider the following issues:
1. Did the Minster and his delegates act "with all due dispatch" in considering the appellant' tax liability for the years 1989-1992?
2. Does the fairness provision contained in subs. 220(3.1) apply to interest accrued as a result of delays in dealing with the appellant's notices of objection?
3. Did the Minister's delegate take into account all relevant considerations in deciding whether to apply the provisions of the fairness provisions of the Income Tax Act?
 Income Tax Act
152. (1) The Minister shall, with all due dispatch, examine a taxpayer's return of income for a taxation year, assess the tax for the year, the interest and penalties, if any, payable and determine
(a) the amount of refund, if any, to which the taxpayer may be entitled by virtue of section 129, 131, 132 or 133 for the year; or
(b) the amount of tax, if any, deemed by subsection 120(2), 122.5(3), 122.51(2), 125.4(3), 125.5(3), 127.1(1), 127.41(3) or 210.2(3) or 210.2(4) to be paid on account of the taxpayer's tax payable under this Part for the year.
152. (1) Le ministre, avec diligence, examine la déclaration de revenu d'un contribuable pour une année d'imposition, fixe l'impôt pour l'année, ainsi que les intérêts et les pénalités éventuels payables et détermine:
a) le montant du remboursement éventuel auquel il a droit en vertu des articles 129, 131, 132 ou 133, pour l'année;
b) le montant d'impôt qui est réputé par les paragraphes 120(2), 122.5(3), 122.51(2), 125.4(3), 125.5(3), 127.1(1), 127.41(3) ou 210.2(3) ou (4) avoir été payé au titre de l'impôt payable par le contribuable en vertu de la présente partie pour l'année.
165. (3) On receipt of a notice of objection under this section, the Minister shall, with all due dispatch, reconsider the assessment and vacate, confirm or vary the assessment or reassess, and shall thereupon notify the taxpayer in writing of the Minister's action.
165. (3) Sur réception de l'avis d'opposition, le ministre, avec diligence, examine de nouveau la cotisation et l'annule, la ratifie ou la modifie ou établit une nouvelle cotisation. Dès lors, il avise le contribuable de sa décision par écrit.
220. (3.1) The Minister may at any time waive or cancel all or any portion of any penalty or interest otherwise payable under this Act by a taxpayer or partnership and, notwithstanding subsections 152(4) to 152(5), such assessment of the interest and penalties payable by the taxpayer or partnership shall be made as is necessary to take into account the cancellation of the penalty or interest.
220. (3.1) Le ministre peut, à tout moment, renoncer à tout ou partie de quelque pénalité ou intérêt payable par ailleurs par un contribuable ou une société de personnes en application de la présente loi, ou l'annuler en tout ou en partie. Malgré les paragraphes 152(4) à (5), le ministre établit les cotisations voulues concernant les intérêts et pénalités payables par le contribuable ou la société de personnes pour tenir compte de pareille annulation.
Did the Minister and his Delegates Act "With All Due Dispatch"
 The appellant's original request for waiver or cancellation of interest was based only upon an allegation of delay in dealing with his notices of objection. Nevertheless, the Motions Judge considered the time taken to conduct the audit and initial reassessment. Given all of the circumstances, I agree with him that there was no undue delay on the part of the respondent during that period of time.
 I turn, therefore, to the period between the time of filing of the notice of objection and the final reassessment. Subsection 165(3) of the Income Tax Act requires the Minister to act "with all due dispatch" upon receipt of a notice of objection.
 The meaning of the phrase "with all due dispatch" has been considered by both the Tax Court of Canada and this Court. InJ. Stollar Construction Ltd. v. The Minister of National Revenue, 89 D.T.C 134, Bonner, J.T.C.C. held, at 136, that the purpose of the requirement that the Minster act "with all due dispatch" is "primarily to protect the individual taxpayer by bringing certainty to his financial affairs at the earliest reasonably possible time." With respect to what constituted a reasonable period of time, the learned judge had this to say:
The words "with all due dispatch" and the words "avec toute la diligence possible" express a clear intention on the part of the legislature to require the Minister to act within a reasonable period, the length of which will vary in accordance with the circumstances of each case. The statutory language does not permit the formulation of a rigid time limit.
In the circumstances of the case before him (a six year delay in processing a tax return), he found it significant that the Minister had failed to adduce evidence to explain a delay which, on its face, was inordinate. He concluded:
It is neither desirable nor possible to identify the last day of the period reasonably required to assess in the circumstances of this case. It is sufficient to say that if the words "with all due dispatch" are not to be deprived of all meaning, the period allowed by those words must be found to have expired long before the assessment under appeal was made.
 A similar approach was adopted by Christie A.C.J.T.C.C. in Ginsberg v.The Queen, 94 D.T.C. 1430 at 1437:
I believe that if there is a delay that prima facie indicates a failure to examine and assess a return with all due dispatch as required under subsection 152(1) of the Act there is an onus on the respondent to establish by evidence pertaining to the manner in which that return was dealt with that the delay was not unreasonable. ...
In the case at hand the lapse of time between the receipt of the returns and the assessments was one and one-half years. It strikes me that on the face of it this is a failure to meet the requirements of subsection 152(1) that returns of income shall be examined and assessed with all due dispatch. If there were evidence of some special circumstance relating to the appellant's returns which established that a delay of 18 months was reasonable then the requirements of the law would have been met. But there is no such evidence before the Court on this appeal.
This Court, while allowing an appeal with respect to the effect of the Minister's failure to act with all due dispatch, nonetheless agreed with the Tax Court Judge's approach to determining whether the Minister had so acted. See R. v.Ginsberg, 96 D.T.C. 6372 at para. 7.
 While the above quoted cases related to the use of the phrase "with all due dispatch" in section 152, I am of the view that the Court's reasoning applies equally to the use of the same phrase in subs. 165(3).
 Turning to the case at bar, then, I am of the view that once the review of the appellant's file was commenced in the January, 1998, it was completed in a reasonable period of time. Thus, the focus of my inquiry is upon the 31 month delay before the commencement of any complete review of the appellant's file. For 27 of those months, there was no contact between Revenue Canada and the appellant.
 In my opinion, this amount of delay is, on its face, inordinate, particularly in light of the fact that once a review of the objections was commenced, it was completed in little more than 6 months. The Minister's only explanation for the delay is that there were staff changes in his office. In my opinion, this is insufficient to meet the onus upon him to show that the delay was not unreasonable. Therefore, I conclude that the Minister, by allowing an unreasonable length of time to elapse prior to reassessing the appellant and informing him of the results, failed to act with the dispatch required by the Act.
 The Minister's delay caused the accrual of significant additional interest charges against the appellant. I turn now to the appropriateness of the remedy that he sought.
Does Subsection 220 (3.1) Allow the Minister to Waive or Cancel Interest Accrued While Dealing With the Appellant's Notices of Objection
 During oral argument, the respondent submitted that the fairness provisions of section 220 only apply to remedy unfairnesses encountered during the period up to the time the taxpayer is first assessed under section 152 of the Act. It was argued that if the taxpayer is unhappy with that assessment and does not want to pay, his remedy is an appeal to the Tax Court.
 In my opinion, this cannot be so. To begin with, there is no express indication that Parliament intended subs. 220 (3.1) to apply only to actions taken under s. 152. Although the fairness provision does make reference to two subsections of s. 152, this is done in the context of explicitly applying the provision notwithstanding those subsections. More importantly, to accept the respondent's position would be to deprive the taxpayer of any remedy in the event that his notice of objection is not considered in a reasonable time. The objection procedure is, in effect, a mechanism to settle disputes between the taxpayer and Revenue Canada. In my view, this Court must be reluctant to deprive taxpayers of the benefits of this settlement process, which is the result if subs. 220 (3.1) is held to be inapplicable during the objection stage.
 I turn, finally, to the question of whether the Director's decision to deny the appellant a remedy was reasonable.
Did the Minister's Delegate Take into Account All Relevant Considerations
 The Motions Judge recited the factors taken into account by the decision-maker in his decision:
The decision maker, ... considered the following in making his decision:
a) the request made by the applicant and the reasons therefor;
b) the applicant is a major shareholder in Hillier's Trades Limited and Northern Home Products Limited;
c) in filing his income tax return for the 1989 taxation year, the applicant did not include income in the amount of $37,836 in his computation of total income;
d)in filing his income tax return for the 1990 taxation year, the applicant did not include income in the amount of $34,632 in his computation of total income;
e) in filing his income tax return for the 1991 taxation year, the applicant did not include income in the amount of $40,386 in his computation of total income;
f) in filing his income tax return for the 1992 taxation year, the applicant did not include income in the amount of $17,615 in his computation of total income;
g) the applicant does not dispute his liability;
h) the "self-assessing" system of taxation puts the onus on the taxpayer to properly report income;
i)the guidelines established in Information Circular No. 92-2 and Internal Directive ARD-92-01 dated April 16, 1992 were not met in these circumstances.
 In my opinion, this list demonstrates that the Minister's delegate, in making his decision considered irrelevant factors while failing to consider at least one very important and relevant factor. Items (c) through (f) on the list relate to the appellant's failure to report all of his income in each of the taxation years. However, these amounts were discovered in the course of the initial audit and reassessment and penalties and interest were assessed at that time. They cannot have any relevance to the unfairness that was alleged by the appellant - delay in considering his notices of objection.
 Item (g) states that "the Applicant does not dispute his liability". In fact, the appellant, by filing notices of objection, did dispute the amount of his liability. Thus, from the time of his notices in June, 1995 until the final reassessment in August, 1998, the appellant did not know what his actual liability was. In the end, his total liability was significantly reduced.
 The central error made by the decision-maker, however, was the failure to consider the processing delays which, as I have held above, resulted in the taxpayer not being informed, within a reasonable time, the amount of tax he owed. Revenue Canada itself recognizes that such delays are relevant to the question of waiver or cancellation of interest. Information Circular 92-
2, Guidelines for the Cancellation and Waiver of Interest and Penalties, provides guidance to decision-makers dealing with requests for waiver or cancellation of interest amounts. Paragraph 6 provides, in part:
6. Cancelling or waiving interest or penalties may also be appropriate if the interest or penalty arose primarily because of actions of the Department, such as:
6. L'annulation des intérêts ou des pénalités ou la renonciation à ceux-ci peuvent également être justifiées si ces intérêts ou pénalités découlent principalement d'actions attribuables au Ministère comme dans les cas
(a) processing delays which result in the taxpayer not being informed, within a reasonable time, that an amount was owing; ...
a) des retards de traitement, ce qui a eu pour effet que le contribuable n'a pas été informé, dans un délai raisonnable, de l'existence d'une somme en souffrance; ...
 While the Director, in his letter to the appellant, mentioned Departmental delays as a possible reason for waiving interest, there is no indication in the letter that he actually considered whether or not such a delay had occurred. Indeed, in the affidavit he swore for the purposes of the proceeding below, which was quoted by the Motions Judge and at paragraph 22 above, he does not list delay as a factor that he considered. His failure to take into account the delay in making his decision was unreasonable.
 I would allow the appeal with costs. The matter is remitted to the Minister of National Revenue for reconsideration of the appellant's request that he waive or cancel interest in light of these reasons.
"J. Edgar Sexton"
J. Richard C.J."
Marshall Rothstein J.A."